Type III IFNs are important mediators of antiviral immunity. IFN-λ4 is a unique type III IFN because it is produced only in individuals who carry a dG allele of a genetic variant rs368234815-dG/TT. Counterintuitively, those individuals who can produce IFN-λ4, an antiviral cytokine, are also less likely to clear hepatitis C virus infection. In this study, we searched for unique functional properties of IFN-λ4 that might explain its negative effect on hepatitis C virus clearance. We used fresh primary human hepatocytes (PHHs) treated with recombinant type III IFNs or infected with Sendai virus to model acute viral infection and subsequently validated our findings in HepG2 cell line models. Endogenous IFN-λ4 protein was detectable only in Sendai virus-infected PHHs from individuals with the dG allele, where it was poorly secreted but highly functional, even at concentrations < 50 pg/ml. IFN-λ4 acted faster than other type III IFNs in inducing antiviral genes, as well as negative regulators of the IFN response, such as USP18 and SOCS1 Transient treatment of PHHs with IFN-λ4, but not IFN-λ3, caused a strong and sustained induction of SOCS1 and refractoriness to further stimulation with IFN-λ3. Our results suggest unique functional properties of IFN-λ4 that can be important in viral clearance and other clinical conditions.